Recent research from Moneyfacts revealed that the choice of products available to first time landlords has reached a record high. There are now 1,405 deals available to novice property investors, up from 645 just five years ago.
Tighter controls on the way that Buy to Let mortgages are underwritten, increased Stamp Duty and changes to the Income Tax rules surrounding investment property have all been cited as reasons why Buy to Let is not as attractive as it has been in the past.
However, there are still plenty of opportunities in the property market. So, if you’re a first-time landlord or you’re thinking of buying a property to let, here are three essential tips.
1. Do your homework
If you’re thinking of investing in property, then it’s important that you know your local area and your local market.
Find out what properties in your area are letting for and research your target demographic. For example, are you looking to attract professionals, young families or students? Speaking to a local letting agent can help, especially if they know the local area well.
Once you have found the right tenant and let the property (see below) your aim should always be to keep a tenant in the property. This means that you need to ensure the rent remains competitive and that you provide a high level of care as a landlord.
You’ll also need to research what it means to be a landlord. We’ll talk about your legal responsibilities next, but you should also bear in mind:
- Being a landlord is a round-the-clock job. You need to be prepared to receive calls from your tenant at any time, especially if there are problems
- You will be accountable for all repairs and maintenance and so you may face unexpected expenses
- You will have to look after the interior and exterior of the property
- You’ll need to arrange suitable insurance for the buildings (and contents if you let out the property on a furnished basis).
Peter Savage, President of ARLA Propertymark, says: “Letting your property is a big deal, and a big decision, both for you and the tenants that will be living there, so it’s really important you understand and appreciate what it entails before you start.”
2. Understand your legal responsibilities
Peter from ARLA Propertymark adds: “Whether you’ve just bought your first BTL, or you own 50, you are governed by the same rules, and with more than 145 pieces of landlord legislation, it’s worth getting up to speed with the basics before marketing your property.
“Failure to do so can result in tens of thousands of pounds in fines and potential prison sentences.”
As a landlord you have several legal responsibilities:
- Meeting safety standards – you’ll have to fit a smoke alarm on every floor and a carbon monoxide detector in any room with a coal fire or wood-burning stove. Each gas appliance must have a gas safety certificate and any electrical devices must be safe for use (an installation survey or Portable Appliance Testing (PAT) can ensure you are compliant). Finally, all furniture must meet safety standards and display the appropriate labels to reduce the risk of fire.
- Ensuring an Energy Performance Certificate (EPC) is in place – since 1 April 2018, your property must have a minimum rating of E on its EPC. If not, it’s unlawful to rent the property and you could face a fine.
- Ensuring your tenant’s Right to Rent – as a landlord you have a responsibility (in most cases) to check that a tenant is legally allowed to reside in the UK. If you don’t, you could face a fine and up to five years in prison.
- Protecting your tenant’s deposit – most tenancies are Assured Shorthold Tenancies (AST) and as a landlord, you have a responsibility to protect your tenant’s deposit using a UK government-approved deposit protection scheme.
- Repairing and maintaining the property – landlords are responsible for most repairs to the exterior of a property (roof, walls, drains etc.) and also have to keep the equipment for supplying water, gas and electricity in working order.
- Giving your tenant advance notice of access – if you need to access the property to carry out repairs and inspections you have to give your tenant reasonable notice and arrange a suitable time with them.
3. Choose the right tenants
Choosing good tenants can be the key to a profitable investment. Poor tenants can have such adverse consequences that it can lead to stress and even a financial loss, so it’s important you pick the right people.
Always take your time, and don’t simply take the first tenants that express an interest. Advertise your property early and widely, either through an agent or privately. And, check that the property description and photos show the property at its best, so you get a good choice of prospective tenants. Make sure you get the right people, not the first people.
Many successful landlords take a proactive approach to letting their property. For example, you might want to contact ‘property wanted’ adverts in your local area or think about targeting your ad at popular local employers.
And, taking a pragmatic approach can help you to find good tenants. For example, most landlords won’t consider a tenant if they have a pet. However, if you’re prepared to accept a cat or dog, you may find your property is in huge demand. You could charge a slightly higher deposit to cover the added risk of damage.
When negotiating with a tenant, trust your instincts. If something doesn’t feel right, then don’t proceed. You don’t have to accept every tenant; just remember it’s illegal to discriminate on the grounds of race, gender, religion or sexual orientation.
Once you have found a tenant, do all the property checks. Common checks include:
- Employment – obtain an employer’s reference
- Identity
- Credit checks
- Previous landlord check
A letting agent can carry out these checks for you, or you can request these items yourself.
The final step is to make sure you undertake your responsibilities properly. Make sure you have a comprehensive tenancy in place before your tenant moves in, and don’t hand any keys over until you have received their deposit, their first month’s rent (if applicable) and a correctly signed and witnessed tenancy agreement.